Ohio rakes in $45M in online taxes

July 21, 2014

DAYTON - Online sales tax collections have hit an all-time high in Ohio this budget year, reaching $45 million, a 68 percent increase over the past five years.

The money continues to pour in this year after Ohio officially joined a multi-state effort to streamline sales tax for online purchases in January. The Ohio Department of Taxation estimates that the state stands to eventually tap into an estimated $308 million worth of tax revenue from online sales.

Still, Ohio doesn't have legal authority to collect from online retailers who don't have a physical location in the state, such as Amazon, which operates its closest warehouse in Hebron, Ky.

The result: Many buyers don't get charged sales tax on millions of dollars' worth of purchases.

While buyers save money, local businesses say the practice hurts them because bargain hunters will turn to online retailers that don't charge taxes, especially for big-ticket items.

Local governments say even though the state is collecting more online sales taxes than ever, the municipalities still are missing out on taxes that could help pay for paving crumbling roads and prosecuting criminals.

"It really puts the state in a position that you have to either raises taxes because you have a revenue source that people aren't paying or you cut the budget where you can," Craig Johnson, the executive director of the Streamline Sales Tax Governing Board, told The Dayton Daily News.

Johnson said that if every seller was required to tax, then the playing field would be leveled for businesses nationwide.

"You're really taking tax out of the equation," Johnson said. "Don't let the government pick the winners and losers based on if you don't have to collect sales tax or you do have to."

In the state's fiscal 2014-2015 budget bill, lawmakers included an Internet sales tax for transactions between residents and out-of-state companies, but Gov. John Kasich vetoed it.

A spokesman for his office said Kasich was concerned about the legality of imposing such a tax on out-of-state retailers and wants to see a federal solution to the problem, instead.

The right to regulate interstate commerce lies with the federal government, said the governor's veto explanation.

"Without some kind of federal action that's going to require these remote sellers to come forward, register and collect, we're not going to be able to force them to do it," said Phyllis Shambaugh, legal counsel for Ohio's sales tax division.